Consumer confidence bounces in August: Economy roundup

Finally, some good news for businesses – after hitting a 16-year low in July, consumer confidence surged 9.1% in August, the third biggest jump in the past five years.

Finally, some good news for businesses – after hitting a 16-year low in July, consumer confidence surged 9.1% in August, the third biggest jump in the past five years.

While the Westpac-Melbourne Institute consumer confidence index is still at historically low levels, the fact that consumers have lightened up a little will please the retail and hospitality sectors, which have been hit hard by the economic slowdown.

Westpac chief economist Bill Evans says the big jump in confidence is easily explained – fuel prices have fallen by 8% and interest rates have stopped climbing.

“People clearly felt some relief about their finances, emphasising just how sensitive family budgets have become to petrol prices.”

Confidence about finances relative to a year ago soared by 18%, expectations about finances over the next year improved by 16.9% and confidence about the one year economic outlook improved by 14.8%.

Meanwhile, sharemarket watchers were closely watching the 2007-08 profit announcement of Telstra and Commonwealth Bank this morning. Telstra posted a 13% rise in net profit to $3.73 billion (for a full report, click here) while CBA shrugged off recent concerns about the state of the financial sector to post a 5% increase in cash profit to a whopping $4.73 billion.

But there were a few dark clouds for CBA. The bank said volatility in the global market had forced a $496 million increase in loan provisions over the previous period and chief executive Ralph Norris said the bank was approaching the new financial year with a cautious outlook.

“We are cautious going into the new financial year and the group will continue with its conservative stance until signs of improvements in economic conditions are evident.”

Both Telstra and CBA were sold off after their announcements, dragging the S&P/ASX200 index down 2.2% or 108.8 points to 4944.8.